The Labor Honeypot

Plexus, annually among the highest-ranking performers in the CIRCUITS ASSEMBLY Top 50 EMS Companies list, yesterday announced a new plant to be built in Thailand.

In its press release, the company touted the facility as an example of “Plexus’ commitment to Environment, Social & Governance (ESG) best practices.” And on the surface, much of this sounds great: green building initiatives, an exterior green zone for employees, and other features.

But the Plexus Code of Conduct goes further than just green initiatives. There’s talk — lots of talk — about corporate and individual ethics, core values and leadership behaviors. And ESG criteria are more than green initiatives: the “social” component is tied to standards for managing relationships with employees, suppliers, customers, and the communities where a company operates.

From the Plexus website: plexus.com/en-us/corporate-social-responsibility

Plexus specifically cites its adherence to the Universal Declaration of Human Rights, a proclamation by the United Nations General Assembly in 1948, which in its preamble notes history’s uncomfortable past with free speech:

Whereas disregard and contempt for human rights have resulted in barbarous acts which have outraged the conscience of mankind, and the advent of a world in which human beings shall enjoy freedom of speech and belief and freedom from fear and want has been proclaimed as the highest aspiration of the common people

And commits its signers to the following:

Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief, and freedom, either alone or in community with others and in public or private, to manifest his religion or belief in teaching, practice, worship and observance.

– Universal Declaration of human rights, Article 18

And Thailand is complex. It routinely jails citizens, including minors, for speaking out. Defaming the monarchy is punishable by up to 15 years in prison per incident. God save the king, but don’t badmouth him.

This is going to sound like I’m picking on Plexus. In fact, this is a problem facing numerous multinationals. One thing they have in common is membership in an official sounding organization called the Responsible Business Alliance (RBA). Formerly the Electronics Industry Citizenship Coalition (EICC), RBA is a group of companies that “share a commitment to ensure working conditions in the electronics supply chain are safe, that workers are treated with respect and dignity, and that business operations are environmentally responsible.”

Fancy words aside, the RBA is a crock. The companies that make up its membership include Apple, Amazon, Foxconn, Pegatron, Wistron and other OEMs and ODMs that are routinely singled out by NGOs, in social media and the mainstream media for disregarding worker health and local labor laws. In my view, the RBA is used as a shield: listen to what we say, don’t look at what we do.

I can’t argue with Plexus’ decision to locate factories where the labor is skilled and generally cheap. But I can’t rationalize how Plexus’ lofty goals of good corporate citizenship fit with Thailand’s pattern of state-sponsored oppression.

Just as we thought the bloom was off the rose in China. Will the EMS industry trade one labor honeypot for another?

The Miracle of Soldering

Folks,

Imagine you are Guglielmo Marconi, and you opened the first radio factory in Chelmsford England in 1912. Using Lee De Forest’s 1906 invention, the triode vacuum tube, your early radios needed a way to connect the various electronic components together. Enter soldering. Soldering is the most cost effective and reliable, some might say only, way to connect electronic components together. It has been since the birth of electronics with the radio.

It is interesting to ponder some of the effects that the radio had on civilization and society. Before the radio, most of the United States was disconnected. People in California didn’t know what was happening in New York in anything like real time. There was also no national entertainment. Following early broadcasts in the 1920s, radio was a staple of most American homes by the 1930s. Families would gather around the radio after dinner to listen to the news and comedy, drama, music, etc. This golden age of radio lasted from the 1920s through the 1950s until radio was supplanted by television. See Figure 1.

Figure 1. A young girl listens to the radio in the 1930s. It would be difficult to overstate the impact of radio…all enabled by soldering.

Electronic soldering, in a sense, is a miracle of technology. It enables connecting copper to copper at a temperature of less than 230°C. The connection is reversible, conducts electricity well, and is mechanically strong. This soldering temperature is crucial for electronics, as the printed wiring boards and component packages contain polymer materials that cannot withstand temperatures much higher than 230°C. This low soldering temperature is especially impressive when considering that to bond copper to copper without solder would require temperatures near that of the melting point of copper or 1085°C.

To work its magic, solder forms intermetallics with copper. See Figure 2. The intermetallic closest to the copper is rich in Cu3Sn, and that closest to the solder is rich in Cu6Sn5.

Figure 2. A schematic cross section of a component lead soldered to a PWB pad. 

It is important that the soldering bond is reworkable. The electronics industry would have difficulty being profitable without this important feature of soldering as most assembly processes have some yield loss that requires rework.

So, the next time you use your smartphone, PC, or TV, remember it wouldn’t be possible without the miracle of soldering.

Cheers,

Dr. Ron

Figure 1 source: By Franklin D. Roosevelt Library Public Domain Photographs – This media is available in the holdings of the National Archives and Records Administration, cataloged under the National Archives Identifier (NAID) 195876., Public Domain, https://commons.wikimedia.org/w/index.php?curid=2151524


Passive Demand Anything But Passive

The component distributor TTI has released its first quarter market report and the outlook is ominous: 28 passive electronic component types have increasing lead times, while 24 saw price increases. Tantalum molded chip cap lead times are now up to 32 weeks.

Lead times for most connectors remain stable, although prices are climbing. The exception is TE, whose lead times are climbing.

Memory supplies are also generally getting tighter.

With some component manufacturers now requesting 18 month forecasts, the risk for double-bookings is on the rise. Beware! Someone always gets stuck holding the bag of chips.

https://www.futureelectronics.com/resources/market-conditions-report/memory

Back in Person

The Covid-19 vaccine rollout has begun and we can’t wait to get back to seeing old and new friends in person.

To that end, I want to call your attention to the return of PCB East to the Boston area in June.

We will head to Marlboro, MA, for some 55 hours of training across three days (June 15-17) of printed circuit board engineering training. There, SI expert Lee Ritchey will have a couple of tutorials: Printed Circuit Board Stackup Design for High Performance Products, and also Power Delivery System Design.

We also will offer two full days of Rick Hartley, including a brand new talk titled, “PC Board Design for Optimum Fabrication and Assembly.” As Rick notes, Happy Holden has presented at PCB West a few times where he’s explained how fabricators determine pricing for bare boards and how EMS suppliers determine pricing for PCB assemblies. Happy shares what he calls a “Fab and Assembly Report Card,” which is how manufacturers assess and weight the variables that drive cost.

So, for instance, as most readers know, board size is a major cost driver. But, as Rick explains, what most designers don’t know is that aspect ratio of length to width also has a major impact. Two boards with the same number of layers and same number of sq. inches but with a difference in their respective aspect ratios – say one is much longer than wide – will push up the bare board cost. Same with assembly, which has even more cost drivers than does fab. Rick is going to do is discuss these major cost drivers.

Rick also told me that at PCB West he had discussions during the chat sessions with some of the bare board fabricators in attendance. One of them said (I’m paraphrasing here), “At any point in time as many as 90% of our jobs are on-hold, waiting for correction or clarity from the customer, so we can proceed.” In Rick’s opinion, designers are flying blind when it comes to many the cost drivers and what suppliers need at both the bare board and assembly level, hence the reason for so many delayed PCBs. These delays also add cost.

What Rick wants to do is to highlight and talk about the factors that Really drive up cost, like board size and aspect ratio, layer count, Z-axis uniformity, copper balance, etc.

And Susy Webb will have brand new, two-day tutorial for design engineers, “A Comprehensive Guide to PCB Design Necessities.” Her class will feature an overview of the entire process of board design, from start to finish, addressing the EE designing their own boards or the new designer who needs to thoroughly understand all the steps and processes. She’ll cover everything from the electronics and physics involved, how the rise time and controlling the energy fields impact the signals on the board, choosing parts types, schematics and signal and constraint issues, mechanical issues, and so on. Susy is also doing an all-day webinar.

We are looking forward to these any other presentations, and also to the exhibits on Jun. 16. Registration is now open, so visit pcbeast.com for details.

And Then There Were 2

Isola and Rogers.

That’s what’s left of the US-owned laminate companies today after Taiwan’s Elite Material Co. announced plans to acquire Arlon EMD.

Yes, consolidation has been in the making for years. And with Isola owned by private equity group (Cerberus Capital Management), it’s anyone’s guess as to how stable that number is.

In reality, it was only a matter of time. The US share of global PCB revenues fell from north of 40% in 1984, to about 30% in 1998, to less than 8% in the recession of 2008. It now stands at roughly 4%. Naturally, the supply base is going to migrate to where the revenue is.

Time was, the US was home to several leading names in laminates: Polyclad (now owned by Isola), Westinghouse (acquired by Allied-Signal in 1992), GE (licensed to Cookson, now sold by Isola), Norplex Oak (sold by Allied Signal to Isola parent Ruetgers in 1999, then everntually shuttered), Taconic (bought by AGC), Nelco (ditto), among others. For its part, Arlon was acquired by Rogers in 2014, which then sold part of it to a private equity group the next year. That unit became Arlon EMD, which Elite is buying.

This is not to say there aren’t domestic sources of materials, of course. There are plenty: Ventec and Shengyi are among those that have expanded in the US in the past few years. A startup called Thintronics, with experienced laminate folks like Tarun Amla at the helm, has potential, but is likely years away from impact. There remain domestic flex circuit suppliers too, including DuPont and Sheldahl.

But the vast majority of multilayer and high-performance specialty material suppliers are held by offshore companies. As the US seeks to build back its manufacturing base, it needs to remember how critical the supplier infrastructure is to a successful industry.

Trouble in India

The riots at a Wistron plant in Narasapura could have lingering effects long after the damage is cleaned up.

India has been touted as the “next China,” a label local trade groups and business executives have relentlessly promoted. Besides being the only countries with a population exceeding 1 billion, however, the similarities are perhaps too many for today’s climate.

Even so, despite Prime Minister Modi’s best efforts to convert the nation into an autocracy driven by a Hindu ruling class, India is fighting a current that China avoided during its rise to manufacturing power, and that flow is getting stronger.

Yes, Nokia and Apple suppliers like Foxconn continue to make plans to expand in the country. But the broader supply base still isn’t there, and, perhaps burnt out from their China experience, expats aren’t relocating by the thousands to help the locals set up and manage companies. The semiconductor industry has changed over the past 20 years. New foundry costs are still rising, and the number of players has shrunk. Putting multi-billion dollar plants in India that replicate older technologies while still finding the resources to compete on the leading-edge might be a longshot, at best.

Nor has India provided the incentives China did to relocate. Instead, it has taken a tack similar to Brazil’s: Steep import taxes that while aimed at China, might actually discourage others from migrating there. Already, India and the US have taken economic swipes at each other, with the US dumping India from its preferred buyer program that allowed zero tariffs exports to the US, and India hiking tariffs on product coming from the US. The EU Parliament is taking an equally dim view of the former British colony’s trade and humanitarian approaches.

Indeed, Modi’s approach to alienating and, some argue, encouraging violence toward India’s religious and ethnic minorities puts Western OEMs in a difficult spot. Already under the gun for their massive investments in China, which have helped prop up that country’s autocratic leadership and create an international powerhouse that is now flexing its economic and military muscle all over Southeast Asia, business leaders might be loathe to plow more assets into yet another unpredictable regime. With governments, including the United States, slapping restrictions on Chinese companies for their alleged treatment of Muslim minorities, it won’t be easy to win any PR battles over why India is somehow an exception.

And the pollution coming out of India might be on a par with China’s — or even worse — hardly an attraction for today’s green marketing campaigns.

It remains to be seen, but I think episodes like Wistron’s will delay the push to the “next China.”

A Not-So Public Affair

Jiangsu Xiehe Electronic started trading today on the Shanghai Stock Exchange. The company makes flex circuits and performs SMT. That should be a big deal, since PCB manufacturers going public has become a rarity.

This is not your father’s printed circuit industry. IPOs are a novelty in our industry these days.

Moreover, almost all the IPOs of fabricators or EMS companies in the past 10 years have been in Asia.

This year, Covid be damned, Sihui Fushi Electronic Technology went public in July on the Shenzhen Exchange, and TLB is scheduled to be listed this month in Korea.

Insofar as I know, that’s it.

Last year was no better. Cal-Comp raised some capital by listing a subsidiary in the Philippines. Ventec went public in Taiwan.

Stretching back over the past decade, there are a few nuggets. But just a few.

Shennan Circuits (2017 IPO) and Zowee Technologies (2010) are public on the Shenzhen Exchange, and OK Industries (2017) is traded in Japan. And Dixon Technologies debuted in 2017 on the India Exchange.

Over in the UK, fabricator Trackwise Designs had an IPO in the UK a couple years ago. And NCAB went public in Sweden.

As private equity firms continue to consolidate fabricators and (mostly) EMS companies, as New Water Capital did with Veris and Saline Lectronics this week, the question becomes, what is their end-game? Will they amass enough revenue through M&A to make a public offering viable? Or will they try to button it up and sell to another PE firm — or perhaps an even larger manufacturer?

And is the era of the publicly traded circuit board manufacturer winding down?

HDPUG’s New Head

The High Density Packaging User Group has named Larry Marcanti executive director, ending Marshall Andrews’ 15-year run as head of the trade consortium.

Larry is an excellent choice. He has a degree in chemical engineering, and has more than four decades’ experience in the printed circuit board industry with Honeywell, Nortel and Avaya, including the eight spent in various levels of involvement at HDPUG. He knows the industry needs inside and out, and will get things done.

But let’s give Marshall his deserved due. He is perhaps the most experienced technical consortia executive this industry ever had. From MCC to ITRI to HDPUG, Marshall had a hand in all the major nonprofit research groups affecting printed circuit boards and packaging.

Many folks step in and out of the trade group participation. Marshall was a lifer. His legacy will last for years.

When 2 is Better Than 5

Before we get too excited over TMSC’s 5nm chip foundry in Arizona — which, keep in mind, is only on the drawing board at this point — we are reminded the chip maker is working on a 2nm factory in Taiwan.

In fact, it could have 2 and 3nm processes online abroad before it even breaks ground in America.

The US needs to get in gear if it wants to be a leader in wafer production.

Reshoring, with a Catch

A trio of recent posts on manufacturing reshoring — or not — caught my eye.

It’s not happening. Writing in Forbes, Workbench chief executive Prince Ghosh points out that the US lacks the human capacity to fully actionize a return of mass production: “US manufacturing still suffers from problems of labor skills and wage costs. Tariffs have succeeded in lowering global dependency on Chinese manufacturing, but they have failed in driving manufacturing back to the US.” He has a point: It took China 20 years to build up the workforce needed to become the World’s Factory, and that’s even with a roughly 800 million or more citizen advantage over every nation but India.

And there’s no assumption investment in the US will go toward the truly leading edge technologies. To wit: If TMSC builds a 5nm semiconductor wafer fab plant in Arizona, as promised, it will still be behind the state-of-the-art 3nm node process expected to be available in 2022.

It’s happening. A more optimistic view comes from Nick Stonnington, a Forbes Councils Member,* says the US “has the potential to be one of the few countries in the world that is essentially self-contained from a manufacturing standpoint.” 

“Reshoring US manufacturing,” he adds, “would not only save enormous transportation costs; it would tie up less capital for less time. When you manufacture your product 5,000 miles away, you must spend extra time specializing your process to each market. In contrast, localized production facilitates just-in-time manufacturing, which optimizes workflow to more quickly produce a more specialized product for less capital investment. 

It’s happening, but not how you think. In Footprint 2020: Expansion and Optimization Approaches for US Manufacturers, consulting giant Deloitte says “the next shift in manufacturing locations is imminent,” but adds “some 98% of companies surveyed plan to either expand existing sites, or open new facilities, in countries with existing operations. This trend is true for virtually all types of facilities, from production to assembly to R&D. China and the US are anticipated to receive the highest number of existing country expansions.”

One topic, three views. Which do you agree with? And why?

*For the uninitiated, the Forbes Council is basically a network of bloggers who pay Forbes to publish their work. So take that for what it’s worth.